PERE Fund Spectrum: Risk and Return Dynamics PPT

This PPT slide, part of the 11-slide Real Estate Investment Trust (REIT) Guide PowerPoint presentation, presents an overview of the Private Equity Real Estate (PERE) fund spectrum, categorizing various types of funds based on their risk profiles and expected returns. It highlights a continuum from "core" funds, which are characterized by lower risk and stable returns, to "opportunistic" funds, which carry higher risk and the potential for greater returns.

The vertical axis indicates the return potential, while the horizontal axis represents the cost of capital. As one moves from left to right, the cost of capital increases, suggesting that higher risk is associated with higher capital costs. The core category is positioned at the lower end of the risk spectrum, indicating that these funds typically invest in stable, well-diversified markets with minimal leverage. This is contrasted with the opportunistic category, which involves investments in under-performing assets, inefficient capital markets, and higher leverage, all of which contribute to a higher risk profile.

The slide also includes bullet points that provide insights into the characteristics of each fund type. Core funds are associated with plentiful information, full audited financials, and efficient capital markets, while opportunistic funds are linked to scarce information and the potential for higher returns through strategic investments in distressed assets.

Understanding these categories is crucial for investors as it helps align their investment strategies with their risk tolerance and return expectations. The visual representation of the fund spectrum serves as a practical tool for evaluating investment opportunities within the PERE space.

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Real Estate Private Equity